Dumping constraints

Updated: Apr 21 2005, 05:30am hrs

Indias proposal on anti-dumping (AD) rules, making application of the lesser duty rule mandatory for all AD purposes is timely. It should go some way to reducing misuse of loopholes in the existing provisions, though it must be added that India is one of the largest users of AD provisions. The concept of lesser duty implies that AD duty less than the margin may be imposed if such lesser duty is adequate to remove the injury to domestic industry. However, as the decision is left to the importing countrys discretion, the latter often exploits this.

During January 1995 to June 2001, more than 60% of the definitive measures imposed were against developing country imports. While the US and Canada impose AD equivalent to the dumping margin, the EU statute has made the lesser rule mandatory. Research, however, has found the distribution of AD duties against Indian exporters in the EU more highly skewed than in the US. This could be because the lesser duty rule in the EU is not very effective, or because estimates of the extent of injury leave room for ambiguity. Further, the concept of imposing AD duties by estimating injury margins protects inefficiency by allowing for higher injury margins.

AD must be used as a protective measure and not as a protectionist one. India, too, needs to address the problem of lobbying by industries producing import substitutes seeking protection. In many cases, products on which AD duties are imposed by the Indian authorities are intermediate inputs used by exporters. During 1995-2000, the average rise in the price of manufactured goods (excluding steel) was 4.11%, while prices of goods subject to AD, such as basic chemicals and pharma, rose 9.4%, and consumer goods prices rose 7.94%. The implications for consumers are obvious. The economic welfare argument for imposing duties is strong only when producer gain from these exceeds consumer loss.

Given that no radical reform is likely in the AD agreement, making the lesser duty mandatory will benefit public interest. And given the EU example, for the lesser duty rule to actually be effective, the methods of calculating the injury elimination levels must be unambiguous. Under the circumstances, India should strengthen its role in review of the AD agreement, as well as in the future rounds of negotiations.